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Real Estate 101: Terms to Know

Whether you're buying your first home or simply considering the option, if you're new to the real estate process, the terminology can feel overwhelming at first. Below are five terms to familiarize yourself with.

Pre-approval. Before you begin seriously house hunting, you should get a pre-approval letter from the bank. This letter, which should be obtained before you officially apply for a mortgage, acts as an estimate of how much a bank will lend you, and shows good faith to the real estate agent (or seller) you're working with, ensuring that you will be able to obtain the loan when needed.

Fixed Rate vs. Adjustable Rate. When it comes to mortgages, it may seem like there is so much you don't know. But at the base level, conventional mortgage loans include fixed rate and adjustable rate mortgages. The difference?

A fixed rate mortgage has a predetermined interest rate throughout the entire life of the loan, often 15 or 30 years. An adjustable rate mortgage, on the other hand, has a fluctuating interest rate, and is often a shorter term, such as five or ten years.

Contingency. When making an offer on a home, you can specify conditions that must be met in order for the deal to go through, and these are called contingencies. You should discuss different contingency options with your agent, but in general, the most common are: financing contingencies, meaning your mortgage needs to go through; inspection contingencies, meaning there can be no major undisclosed issues that pop up on your inspection; or appraisal contingencies, meaning the final appraised value is close to the offer you've made.

Home inspection. Okay, you have a pre-approval letter, you've made an offer on a home and obtained your mortgage. Before you close, you’ll want to schedule a home inspection. With a home inspection, a qualified inspector will go through the entire home and review major things like the foundation, wiring, heating, roof, and more, to make sure there are no undisclosed issues with the home, which could ultimately impact your closing.

Title insurance. Once your offer has officially been accepted, most mortgage lenders require you to pay title insurance. Often part of the closing costs, title insurers will search the public records to make sure your seller actually had rights to the title and that there are no unpaid taxes or other liens on the property.

As a Member of the Top 5 in Real Estate Network®, I, along with my team, have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact our team any time to learn more about this important information, and be sure to forward this article on to any friends or family that may be interested as well.